Quince Therapeutics(QNCX) - 2022 Q2 - Quarterly Report

markdown [PART I. FINANCIAL INFORMATION](index=3&type=section&id=PART%20I.%20FINANCIAL%20INFORMATION) [Item 1. Financial Statements (Unaudited)](index=3&type=section&id=Item%201.%20Financial%20Statements%20(Unaudited)) The unaudited financial statements for Q2 2022 report a net loss of $16.6 million, total assets of $117.9 million, reflecting the Novosteo acquisition and reduced R&D expenses [Condensed Consolidated Balance Sheets](index=3&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) As of June 30, 2022, total assets decreased to $117.9 million due to reduced cash, while liabilities significantly decreased, and new assets from the Novosteo acquisition were recognized Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | June 30, 2022 | December 31, 2021 | | :--- | :--- | :--- | | **Assets** | | | | Cash and cash equivalents | $46,928 | $69,724 | | Total current assets | $99,370 | $111,673 | | Goodwill | $825 | $— | | Intangible asset | $5,900 | $— | | **Total assets** | **$117,863** | **$133,228** | | **Liabilities & Equity** | | | | Total current liabilities | $5,950 | $14,222 | | **Total liabilities** | **$6,331** | **$14,642** | | Accumulated deficit | $(274,804) | $(236,599) | | **Total stockholders' equity** | **$111,532** | **$118,586** | [Condensed Consolidated Statements of Operations and Comprehensive Loss](index=4&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations%20and%20Comprehensive%20Loss) The company reported a reduced net loss of $16.6 million for Q2 2022 and $38.2 million for the six-month period, driven by decreased R&D expenses despite higher G&A costs Condensed Consolidated Statements of Operations Highlights (in thousands) | Metric | Three Months Ended June 30, 2022 | Three Months Ended June 30, 2021 | Six Months Ended June 30, 2022 | Six Months Ended June 30, 2021 | | :--- | :--- | :--- | :--- | :--- | | Research and development | $7,199 | $14,719 | $19,960 | $31,543 | | General and administrative | $9,059 | $7,064 | $18,116 | $13,553 | | Loss from operations | $(16,258) | $(21,783) | $(38,076) | $(45,096) | | **Net loss** | **$(16,564)** | **$(21,754)** | **$(38,205)** | **$(44,840)** | | Net loss per share | $(0.51) | $(0.74) | $(1.22) | $(1.52) | [Condensed Consolidated Statements of Cash Flows](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Net cash used in operating activities for the six months ended June 30, 2022, was $31.5 million, with cash and cash equivalents decreasing by $22.8 million to $46.9 million, influenced by the Novosteo acquisition Condensed Consolidated Statements of Cash Flows Highlights (in thousands) | Cash Flow Activity | Six Months Ended June 30, 2022 | Six Months Ended June 30, 2021 | | :--- | :--- | :--- | | Net cash used in operating activities | $(31,506) | $(31,172) | | Net cash provided by investing activities | $8,162 | $37,267 | | Net cash provided by financing activities | $730 | $1,113 | | **Net (decrease) increase in cash** | **$(22,796)** | **$7,208** | | **Cash and cash equivalents at end of period** | **$46,928** | **$74,049** | - Non-cash activities included the acquisition of Novosteo's net assets for **$16.2 million** in exchange for common stock[20](index=20&type=chunk) [Notes to Unaudited Condensed Consolidated Financial Statements](index=8&type=section&id=Notes%20to%20Unaudited%20Condensed%20Consolidated%20Financial%20Statements) The notes detail the company's name change to Quince Therapeutics, the Novosteo acquisition and strategic shift to rare skeletal diseases, and confirm sufficient liquidity for at least 12 months - Effective August 1, 2022, Cortexyme Inc. changed its name to Quince Therapeutics, Inc., shifting its focus to precision therapeutics for debilitating and rare diseases[23](index=23&type=chunk) - On May 19, 2022, the company acquired Novosteo, Inc., a biotech focused on rare skeletal diseases, issuing **5,520,000 shares** as part of the transaction[24](index=24&type=chunk) - As of June 30, 2022, the company held **$94.7 million** in cash, cash equivalents, and short-term investments, deemed sufficient for at least the next 12 months of operations[33](index=33&type=chunk) - The Novosteo acquisition, valued at approximately **$16.5 million**, resulted in the recognition of a **$5.9 million** IPRD intangible asset and **$825,000** in goodwill[118](index=118&type=chunk)[119](index=119&type=chunk)[122](index=122&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=26&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses the strategic shift to rare skeletal diseases following the Novosteo acquisition, highlighting decreased R&D expenses and confirming sufficient capital into the second half of 2025 [Overview and Business Acquisition](index=26&type=section&id=Overview%20and%20Business%20Acquisition) The company transitioned to a preclinical stage biopharmaceutical company focused on rare diseases following the May 2022 Novosteo acquisition, prioritizing its bone-targeting drug platform and changing its name to Quince Therapeutics - On May 19, 2022, the company acquired Novosteo, Inc., issuing **5,520,000 shares** of common stock, representing approximately **15.5%** of outstanding stock post-acquisition[130](index=130&type=chunk)[132](index=132&type=chunk) - The acquisition initiated a strategic shift to prioritize Novosteo's bone-targeting drug platform and lead compound NOV004 for rare skeletal diseases[134](index=134&type=chunk) - Legacy programs, including atuzaginstat and 3CLpro inhibitor programs, will be advanced through proactive out-licensing efforts[134](index=134&type=chunk) [Drug Candidate Portfolio](index=28&type=section&id=Drug%20Candidate%20Portfolio) The company's pipeline is now led by NOV004, with an IND submission planned for H1 2023, while legacy assets like atuzaginstat (COR388) and COR588 will be pursued through out-licensing or partnerships - **NOV004:** The lead asset for accelerating bone fracture repair, with an IND submission planned for the first half of 2023[142](index=142&type=chunk) - **Atuzaginstat (COR388):** Under a full FDA clinical hold since January 25, 2022, with further development for any indication contingent on external out-licensing or partnership[145](index=145&type=chunk) - **COR588:** A second-generation brain penetrant lysine gingipain inhibitor, which completed Phase 1 trials and will be advanced via out-licensing or partnership[152](index=152&type=chunk) [Results of Operations](index=34&type=section&id=Results%20of%20Operations) R&D expenses decreased significantly in Q2 2022 due to the conclusion of the COR388 trial, while G&A expenses increased from acquisition and severance costs, leading to a reduced net loss for both the quarter and six-month period Comparison of Operating Expenses (in thousands) | Expense Category | Three Months Ended June 30, 2022 | Three Months Ended June 30, 2021 | Change (%) | | :--- | :--- | :--- | :--- | | Research and development | $7,199 | $14,719 | (51.1)% | | General and administrative | $9,059 | $7,064 | 28.2% | | **Net Loss** | **$16,564** | **$21,754** | **(23.9)%** | Comparison of Operating Expenses (in thousands) | Expense Category | Six Months Ended June 30, 2022 | Six Months Ended June 30, 2021 | Change (%) | | :--- | :--- | :--- | :--- | | Research and development | $19,960 | $31,543 | (36.7)% | | General and administrative | $18,116 | $13,553 | 33.7% | | **Net Loss** | **$38,205** | **$44,840** | **(14.8)%** | - The decrease in R&D costs was primarily due to the conclusion of the GAIN Phase 2/3 clinical trial for atuzaginstat (COR388) in late 2021[186](index=186&type=chunk)[198](index=198&type=chunk) - The increase in G&A expenses was mainly due to severance costs and legal expenses related to the Novosteo acquisition and regulatory compliance[192](index=192&type=chunk)[203](index=203&type=chunk) [Liquidity, Capital Resources and Plan of Operations](index=37&type=section&id=Liquidity%2C%20Capital%20Resources%20and%20Plan%20of%20Operations) As of June 30, 2022, the company held $105.7 million in cash and investments, projected to fund operations into H2 2025, prioritizing NOV004 development while seeking partnerships for legacy assets - As of June 30, 2022, the company had cash, cash equivalents, and investments totaling **$105.7 million**[207](index=207&type=chunk) - The company believes existing cash and investments are sufficient to fund planned operations into the second half of 2025[208](index=208&type=chunk)[214](index=214&type=chunk) - Future plans prioritize internal development of the bone-targeting drug platform and NOV004, while seeking strategic partnerships for legacy assets like atuzaginstat (COR388) and COR588[210](index=210&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=40&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company faces market risks from interest rate sensitivity on its investment portfolio and foreign currency exchange rates, but believes a 100 basis point interest rate change would not materially affect its holdings - The company's primary market risks include interest rate sensitivity on its **$105.7 million** cash and marketable securities portfolio, and foreign currency exchange rate risk from Australian operations[225](index=225&type=chunk)[226](index=226&type=chunk)[227](index=227&type=chunk) - Due to the short-term nature of investments, a 100 basis point change in interest rates is not expected to materially affect the fair market value of holdings[226](index=226&type=chunk) [Item 4. Controls and Procedures](index=41&type=section&id=Item%204.%20Controls%20and%20Procedures) As of June 30, 2022, management concluded that disclosure controls and procedures were effective, with no material changes to internal control over financial reporting during the quarter - Management concluded that as of June 30, 2022, the company's disclosure controls and procedures were effective[231](index=231&type=chunk) - No material changes in internal control over financial reporting occurred during the quarter[232](index=232&type=chunk) [PART II. OTHER INFORMATION](index=42&type=section&id=PART%20II.%20OTHER%20INFORMATION) [Item 1. Legal Proceedings](index=42&type=section&id=Item%201.%20Legal%20Proceedings) The company is not currently a party to any material legal proceedings - As of the filing date, the company is not involved in any material legal proceedings[235](index=235&type=chunk) [Item 1A. Risk Factors](index=42&type=section&id=Item%201A.%20Risk%20Factors) The company faces significant risks including dependence on NOV004, challenges in out-licensing legacy assets like atuzaginstat (COR388) under FDA clinical hold, the need for additional funding, and integration complexities from the Novosteo acquisition - The business is substantially dependent on the success of NOV004 and the uncertain successful out-licensing of legacy assets[237](index=237&type=chunk) - The FDA has placed a full clinical hold on atuzaginstat (COR388), potentially delaying or precluding its approval and impacting other pipeline candidates[237](index=237&type=chunk)[256](index=256&type=chunk) - As a preclinical stage entity with limited operating history and no sales revenue, the company will require substantial additional funding to continue operations[237](index=237&type=chunk) - Significant risks exist related to integrating the Novosteo acquisition, including cultural blending, key personnel retention, and managing expanded operations[237](index=237&type=chunk)[238](index=238&type=chunk)[239](index=239&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=88&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) The company reported no unregistered sales of equity securities during the period - None[457](index=457&type=chunk) [Item 3. Defaults Upon Senior Securities](index=88&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) This item is not applicable - Not Applicable[458](index=458&type=chunk) [Item 4. Mine Safety Disclosures](index=88&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable - Not Applicable[459](index=459&type=chunk) [Item 5. Other Information](index=88&type=section&id=Item%205.%20Other%20Information) The company reported no other information - None[460](index=460&type=chunk) [Item 6. Exhibits](index=89&type=section&id=Item%206.%20Exhibits) This section lists exhibits filed with the Quarterly Report on Form 10-Q, including the Merger Agreement, employment agreements, equity plans, and officer certifications